And so, after days of prevarication, posturing, mud-slinging and disarray, the American debt crisis is resolved. Well, not resolved exactly. Increasing sovereign debt from $14.3tn to a potential $16.7tn is, I think, somewhat stretching the definition of “resolved”. But at least it gets us past today, or whenever it is that you happen to believe that America would have defaulted on its existing debt repayments. I don’t doubt that had that been allowed to happen, the consequences would have been unsettling to say the least. So I’m sure that relieved is the proper emotion to be feeling.
I’ve had cause on more than one occasion to bemoan the habit that nearly all of us have to split our fellow human beings into those who are right about everything (those, naturally enough, with whom we agree) and those who are wrong about everything (unsurprisingly, those with whom we disagree.) Most commentators have concluded that insofar as there’s been a political winner from all this debt intransigence, it’s been the Republican Party. And in turn, that the Republican Party have only become debt hawks as a result of the Tea Party movement. And, good lefty liberal that I am, I’m perfectly well aware that the Tea Party movement is the work of the devil. From these simple facts I can thus safely deduce first, that since I disagree with the Tea Party they must therefore be wrong about everything, and second, that if raising the debt limit is opposed by the Tea Party, I am thus duty bound to support its ever-upward ballooning.
Not so. The Tea Party have been absolutely right to point to the American debt limit and to say that not only should it not be raised, it should be reduced. At its most basic debt is a simple concept. It’s paying tomorrow for things one wants to do now. And paying more tomorrow than one would have paid today had one had the money right now. In some things this makes a lot of sense. Like buying a house. Something that’s going to last, costs more than it’s reasonable to expect one has liquid funds to pay for right now, and which will still be there after the debt’s been repaid. In a political, rather than personal domestic, context it might be something like building a high speed rail link. But it makes no sense to use debt to pay for tomorrow’s breakfast. In the political realm, perhaps, to pay for the salaries of one’s doctors. If you’re going to use debt to finance the most basic and constant functions of one’s society, then it’s pretty damn obvious that it’s all going to go pear-shaped rather quickly.
Alas, that’s about the limit of the Tea Party’s rightness. Because the alternative to debt is to use more of your current wealth creation to pay for the important, routine, functioning of the state. There is, of course, a simple, tried and tested way of doing this. It’s called taxation. We need, throughout the western capitalist democracies, to reduce debt, and increase taxation. If we can increase the productivity of our economies, that might be a good thing to do as well. I say “might” because it won’t be a good thing if it’s done at the expense of yet more environmental degradation. Whether we reduce deficits, or increase taxation, we’re going to make some people relatively poorer than they would have been. The problem with just reducing deficits and letting everything else rip (as the Tea Party have insisted upon) is that inequality and injustice are stoked up even further. Increasing taxation, on the other hand, provides a society with the opportunity to focus the impoverishing consequences on those who will suffer least – the rich. I’ve no idea why this is so unpopular amongst Tea Party-goers since many of them are poor.
But be that as it may. The American economy cannot continue to increase its cumulative debt indefinitely. I also happen to think that the American state can no longer continue to allow a few of its citizens to enrich themselves indefinitely, and impoverish many, many more of them if not indefinitely, at least unconscionably. Ultimately, the American debt is not an economic deficit, it’s a deficit of humanity.